By Claudia Assis and April H. Lee, MarketWatch SAN FRANCISCO (MarketWatch) -- Gold futures rose modestly Tuesday amid signs of bargain-hunting following prices hitting two-month lows in the previous session and as European debt worries abated in investors' minds. Gold for August delivery added $5.20, or 0.4%, to $1,187.10 an ounce on Comex division of the New York Mercantile Exchange. "There's still a lot of bottom-fishers in the market," said Frank Lesh, broker and analyst at FuturePath Trading in Chicago. Gold had ended below $1,182 an ounce on Monday, the lowest close for a most-active contract since May 21. Interest in gold fell as concerns about debt problems in Europe have diminished, as underscored by Ireland's successful sale of government bonds Tuesday. A day after Moody's Investors Service cut its credit rating, the country sold 1.5 billion euros ($1.9 billion) of the bonds and thus has completed 83% of this year's funding, helping bolster more broadly investor confidence in European sovereigns. Read more about Ireland's auction here. "Gold is really lacking a catalyst," Lesh said. "That flight-to-safety is not evident at the moment. Whether or not this is just a summer slowdown, we'll have to see. But there's not a lot of impetus." The dollar also strengthened after a worse-than-expected report showed that U.S. housing starts fell 5% during June, to an annualized pace of 549,000. Read more about the housing report here. The dollar index (DXY 82.76, +0.25, +0.30%) , which tracks the greenback against a basket of six major currencies, stood at 82.86, up about 0.4% from Monday. Gold's decline is both a price correction and driven by investor expectations of deflation, said Jeffrey Friedman, senior market strategist with Lind-Waldock. "We were due for a correction. Gold had a nice run, making new highs when everything else could not," said Friedman. "People are unwinding their gold positions in a continuation of a deflationary concept," he said. The analyst pointed to stagnant top-line results in recent earnings announcements and readings of low inflation from price indexes and the Federal Reserve, all of which suggests that investors "are showing no fear of inflation." Shares of the SPDR Gold Trust (GLD 116.62, +0.89, +0.77%) , the largest exchange-traded fund backed by gold, were down 0.3%. Copper and silver tracked gold, but palladium and platinum, more widely used in industrial applications, fell as the latest round of quarterly earnings disappointed investors and U.S. stocks fell. Investors are looking to the stock market as a barometer of economic conditions and, by extension, of industrial activity. September copper added 7 cents, or 2.2%, to $3 a pound. September silver rose 13 cents, or 0.7%, to $17.68 an ounce. Platinum for October delivery declined $9.30, or 0.6%, to %1,503.80 an ounce. September palladium retreated $3.35, or 0.7%, to $440.65 an ounce.

Source